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Stabilizing the Health Insurance Market

If you are like many Americans then you have probably been following the efforts by the Trump administration and Congress to reform the U.S. health care system with considerable interest. Whether you are an enrollee in an Obamacare health plan or not, you or someone close to you probably has a health plan that is likely to be affected by any major changes to health care.

In case you are unaware of why Republican lawmakers are so serious about repealing Obamacare, there are some things you should know.  In 2010, President Barack Obama passed the Affordable Care Act, a major piece of legislation that vastly changed the American health care system.  In addition to granting greater access to Medicaid (the federal insurance program for lower income households), the ACA also established regional health insurance exchanges where American families could obtain subsidized health coverage.


Although almost 20 million more Americans were able to get health coverage under these programs, there were some serious problems with Obamacare. The new system was predicated on a large number of insured that would include sick as well as healthy people.  Unfortunately, many of the healthier Americans did not sign up for health insurance, leaving insurers to cover the costs of insuring primarily sick enrollees.

As a result, many insurers who offered plans on the ACA-sponsored health exchanges realized that it was too expensive to participate. This inspired many insurers to exit the individual insurance markets around the country. Consequently, the high cost of insuring the new, unhealthy enrollees and the dwindling competition helped drive up premiums of most Obamacare health plans. Furthermore, many of these insurance policies also had high deductibles and out-of-pocket expenses that made them almost useless except for covering catastrophic medical emergencies.

Another problem for the insurance markets was that once President Donald Trump took office in January of 2017, he issued an executive order to the Internal Revenue Service to stop enforcing the Individual Mandate provision of the Affordable Care Act.  The Individual Mandate instituted a financial penalty on taxpayers that did not have health coverage.  Although extremely unpopular, this mandate was critical in pushing younger, healthier Americans into the insurance pool.  Without enforcement of the Individual Mandate, insurance premiums would likely increase.

Governmental Solutions

In response to the “death spiral” of the ACA-sponsored health exchanges, the Republican-controlled Congress under the guidance of President Donald Trump proposed new bills that would repeal the Affordable Care Act.  The U.S. House of Representatives presented the American Health Care Act to the public and, eventually, passed the bill by a narrow margin. Then the Senate took up the House bill. It drafted two versions of the bill, but neither were successfully passed.  These failures essentially ended any likelihood of passing a health care reform package in 2017.

President Trump, frustrated that his key campaign promise of repealing Obamacare was not fulfilled, then announced that he would allow Obamacare to “implode” and publicly considered discontinuing the cost stabilization subsidy payments to insurers.  These subsidies were a key component of the Affordable Care Act that kept low the premiums on health plans for lower income enrollees. Without the billions in dollars of payments, premiums on low-cost health plans would rise significantly.

Troubled Insurance Markets

In addition to systemic issues that are plaguing the Obamacare insurance markets, the uncertainty of what the future could hold is also inflating premiums and policy expenses. Across the country, insurers are raising premiums, some as high as 45 percent next year. Industry analysts suggest that the lack of assurances regarding cost sharing subsidies and health care reform are making up to 20 percent of that premium increase.

Because insurers aren’t sure if the Trump administration will fulfill its promise to make cost sharing subsidy payments, insurers are preparing to raise premiums on lower end health plans.  Similarly, if the government continues to abdicate its enforcement of the Individual Mandate, premiums will have to rise to cover the cost of insuring unhealthy enrollees.

Health Insurance Mandate
Senir Design/

Potential Relief

A new study by the Kaiser Family Foundation has found that although initial costs of insuring new enrollees was higher than expected, there has been a stabilization of costs in recent years. The study examined how much insurers paid out in claims and the average amount of premiums paid by enrollee; it determined that many newly insured had higher claim costs, presumably as they sought treatment for untreated health issues, but the number of claims dropped in recent years. This has contributed to rate decreases in some areas like Providence, RI.

After the collapse of the Republican push to repeal and replace the Affordable Care Act, many Republican lawmakers approached their Democratic counterparts in hopes of implementing bipartisan solutions for the unstable insurance exchanges. Many Republicans in Congress have also urged the White House to continue making cost sharing payments to insurers so that more Americans may remain insured.  The Trump administration continues to make these payments but has not rescinded its threat to discontinue them. Some Congressional leaders have also said that if the administration did stop making subsidy payments, they would act to appropriate the funds legislatively.

The US House of Representatives

Bipartisan groups are also considering incentives to lure more insurers into insurance markets. Some proposals include tax exemptions for insurers as well as government-sponsored plans like those offered to federal employees.  Renewed competition and more choices would enable more Americans to purchase a health plan that meets their financial and medical needs.

Another possible counteragent to the rising cost of insurance is action taken by state insurance regulatory agencies. Insurers must obtain approval from regulators for any rate hikes, and there is no guarantee that they will receive approval.

Finally, there is the possibility that the Trump administration will recognize that a stronger insurance market across the country is better for America. The White House could reassure the health insurance industry that it will make cost sharing subsidy payments and encourage enrollment by enforcing the Individual Mandate.  The President could also invite Congressional leaders from both parties to collaborate in making the insurance markets stronger.

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